NPC Reminds Online Lenders On Use Of Customers’ Personal Information

Online lenders are popping here and there for a reason – it helps bridge the financial gap and give access to thousands of unbanked Filipinos. Finally and even without a savings account or a credit card, you can now apply for a loan to finance your needs. Application is easier, too, because you simply have to download the lender’s app for free.

Similar to banks, applying for an online cash loan requires submission of your personal information. This includes address, current employment, monthly income, and even references. Online lenders need these information so they can properly evaluate if you are qualified.

Here’s the thing: there are lenders that use personal information to harass customers. In fact, the National Privacy Commission or NPC received numerous complaints about how online lenders use the submitted information to harass and publicly shame those who were unable to pay their loans on time. NPC was able and still acting on it, closing 26 online lending companies as of this writing. Since there are still lenders who continuously harass their customers, the agency issued NPC Circular No. 20-01, which serves as a guideline on how to process personal data during loan transactions.

What’s written in the said circular? 

The said circular was issued for a reason: online lending privacy rules must be tightened. 

Here’s a simplified version of the circular:

• Online lenders must follow rules in relation to “Know Your Customer” or KYC policy when collecting information.
• Collection of information must be limited to determining the borrower’s credit worthiness, fraud prevention, and for purposes of collecting payments. As soon as these purposes are achieved, the online app must prompt the borrower to disallow or turn off the said permissions.
• Entities that engage in collection of personal data information for purposes of granting loan facilities must ensure protection of these information using organization, physical, and technical security measures. In other words, personal data must be protected against third-party entities, hacking, and other activities that could compromise the information shared by the customer.
• Borrowers must be informed of the purpose of collecting personal data. It should be used strictly for evaluation and processing of loan. If information will be used other than for loan processing, then the borrower must be informed first.
• Online lenders are prohibited from requiring unnecessary permission involving sensitive information.
• Submission of photo or selfie is part of the application process because of the KYC. Once the photo is taken, the app must turn off permission to access the camera by default. If this cannot be done automatically, then at least prompt the borrower through pop-up notification that they can turn of the permission.
• Photo of the borrower must NOT be used to harass or publicly shame the person.
• Copying phone contacts and email list, and harvesting of social media accounts are strictly prohibited and must never be used to publicly shame the borrower.
• Lenders must provide a separate interface where borrowers can provide character references or co-maker. Consequently, online lenders must inform the character reference about the purpose of the call and how the contact details were gathered.
• There must be an option for a person to be removed as a character reference.
• Pursuant to SEC Memorandum Circular No. 18, series of 2019, online lenders are prohibited from using personal data to engage in unfair collection practices. Unfair collection practices include but not limited to use or threat to use violence, using obscene or insulting language against the borrower, publication of names and other personal information of the borrower in case of non-payment, and using deceptive means to collect or attempt to collect loan payment. You can learn more about the said circular here.

Simply put, online lenders CANNOT publicly shame, insult, distribute personal details, or harass a borrower due to non-payment of loan obligations. In return, borrowers must be financially responsible to pay off existing loans.

Keep in mind that online cash loans are often unsecured, which means there is no security to guarantee the money you borrowed. As a borrower, you are expected to pay off your financial obligations on time and in full. Otherwise, it could adversely affect your credit standing, too.